When you start researching home improvement loans you'll quickly learn that there are different ways to borrow money for house improvements. The two general types of loans are often categorized as "secured" and "unsecured" loans.

An unsecured loan is a loan which is not "secured" against any object of value and isn't held up with any sort of collateral. Most lending institutions will give an unsecured loan for home improvements based on a person's credit rating. A hardware store credit card is actually an unsecured loan. You often get an unsecured loan if you have a steady job. You can even get an unsecured house improvement loan when you have zero home equity.

Home improvement store credit cards are good to use for small home improvement projects that are under $1,500 because the application process is usually fairly simple. These credit cards are the most common types of unsecured loans for home improvements. You can sometimes qualify for a 0% interest rate on some cards for three months.

Secure loans are loans in which the lending institution has some sort of collateral or item which they technically "own" until you pay it off. When you finance a motorcycle or buy a house with a mortgage the bank technically owns what you bought until you've paid off the debt amount with interest. With a secured house improvement loan your house is the collateral. If you default on your loan then the bank can take your house or car and sell it in an effort to regain some of the money they lent you.

Secured house improvement loans often have more paperwork but they also usually offer a smaller interest rate because they are safer for financial lenders to give out due to the collateral involved. There is often more paperwork and a longer delay associated with secured loans because they are so much larger than most unsecured loans. Depending on your tax situation you may even be able to deduct the interest you pay on your house improvement loan from your income tax returns.

No matter what type of home improvement financing you consider remember that you do have to pay the money back and you will be paying interest on the money owed. Plan ahead and make sure you can really afford the regular payments before you go forward with your loan. Many house improvement plans are changed when people finally begin to consider how home improvement financing work. - 31382